What is the Transportation Services Index (TSI)?
The TSI is a monthly measure of the volume of services performed by the for-hire transportation sector. The index covers the activities of for-hire freight carriers, for-hire passenger carriers, and a combination of the two. The TSI is still under development and is therefore experimental. It is being examined for refinements in data sources, methodologies, and interpretations.

What does the index tell us?
The TSI tells us how the output of transportation services has increased or decreased from month to month. The index can be examined together with other economic indicators to produce a better understanding of the current and future course of the economy. The movement of the index over time can be compared with other economic measures to understand the relationship of transportation to long-term changes in the economy.

What areas of transportation are covered by the index?The freight transportation index consists of:

The index does not include international or coastal steamship movements, private trucking, courier services, or the United States Postal Service.

The passenger transportation index consists of:

local mass transit,

intercity passenger rail, and

passenger air transportation.

The index does not include intercity bus, sight seeing services, taxi service, private automobile usage, or bicycling and other nonmotorized means of transportation.

The components have been selected to give the best coverage possible of the for-hire transportation industry, subject to current limitations on the availability of monthly data. They are grouped to conform to the classifications used in the National Income and Product Accounts.

Why was the index developed?
In fiscal year 2002, researchers from the State University of New York at Albany (Kajal Lahiri and Vincent Yao) and George Washington University (Herman Stekler) studied the relationships between transportation data and measures of the economy. Support for this research was provided through a BTS research grant on "Leading Economic Indicators for the Transportation Industry." One of the outcomes of the research was the creation of a set of indexes that reflected passenger, freight, and total transportation services output. These indexes, which were originally designed to serve as coincident measures of the transportation sector of the economy, were recognized as valuable measures that BTS should produce and provide to the public.

Economists, forecasters, and others use monthly economic measures to understand the performance of the economy, to understand the short-term relationships among different sectors of the economy, and to forecast the performance of the economy, particularly business cycles. To do this they use measures called "indicators," such as employment, manufacturing production, sales, business inventories, purchasing managers' plans, and consumer confidence, among other things. In addition to giving information that is valuable in its own right, the indicators often have a relationship with the growth of the economy, measured by Gross Domestic Product (GDP).

There are several types of indicators:

Coincident indicators tend to move along with GDP—that is, when GDP increases, they increase, and vice versa.

Leading indicators portend changes in GDP—that is, when they go up, GDP tends to go up some time later; when they go down, GDP tends to eventually drop.

All of these indicators help economists, forecasters, investors, and business decisionmakers better understand the course of the economy. Leading indicators are especially useful in forecasting turning points in the economy, which are of particular interest to economic decisionmakers. Coincident indicators are also useful in determining the current state of the economy.

Until now these measures did not include an overall multimodal monthly indicator based on production of transportation services—an economic sector of great interest to the business and policymaking community. BTS has learned that many in the forecasting and academic communities would particularly like to see such a measure. It could be used in conjunction with other indicators, such as inventory change and consumer confidence, to forecast future economic performance. It could also be used to provide confirming evidence of current economic performance as a coincident indicator. The academic and policy communities could use it to better understand the short-term relationships between transportation output and other economic sectors.

To provide such a measure, BTS undertook development of this experimental index of output in the transportation industry. The services produced by each subsector of the industry are measured in terms of physical outputs—ton-miles for freight modes and passenger-miles for passenger modes. These data are then deseasonalized, adjusted, indexed, and combined to create the monthly index.

What does the index provide that other transportation data do not?
TSI is the only combined, multimodal, seasonally adjusted economic measure of transportation measured on a monthly basis.

How was the index put together?Data Gathering
The BTS staff gathered monthly data for each mode of transportation from a range of government and private sources.

Forecasting
Some data series were not complete through December 2003, the ending date through which we published the initial index. BTS, therefore, forecast the one or two missing months, using a statistical technique known as an auto regressed moving average. As production of the TSI continues, the need to forecast missing data will be reduced. However, it is not uncommon in indexes of this type for monthly data to be delayed because of reporting or other problems and for preliminary data to be subsituted.

Deseasonalizing
Because the principal purpose of the index is to reflect monthly shifts in transportation services output, and analyze short-term trends, it is essential that it be adjusted for the normal seasonal changes that impact the transportation sector. Transportation is highly seasonal, and without adjustment the index would not give an accurate picture of underlying changes in transportation output. BTS has therefore deseasonalized the data for each mode using standard statistical methodologies.

Indexing
While physical measures are gathered for each mode, ultimately for combination and analysis, the data from the different modes must be converted into an index. BTS uses 1996 as the base year and indexes by dividing the current monthly value by the average value for the 12 months of 1996.

Weighting and Chaining
The final step in creation of the index is combining the individual mode indexes into the three summary indexes, the freight index, the passenger index, and the overall, or combined, TSI. The weighting is based on the relative economic value added of each mode. Not all ton-miles are equivalent in their economic importance, nor are all passenger-miles. For example, the average price paid per ton-mile for freight moved by rail is less than the average price paid per ton-mile for freight shipped by truck due to differences in factors such as haul length, shipment volumes, and resultant economies of scale. By using an economic measure for weighting, we recognize these differences and make the index more valuable as a transportation measure that can be used together with other economic measures, such as GDP.

Value added is used for consistency with other indicators that are used in relation to GDP, for example industrial production. By using value added, rather than gross revenues for each sector, we avoid double counting inputs (i.e., diesel fuel) to the transportation sector.

Because value-added data is available from the Bureau of Economic Analysis on an annual basis only, weights are determined annually and applied throughout the year.

Valued added reflects the volume of physical transportation as well as the value of that volume. Because we have already measured monthly changes in that volume, it is necessary to ensure that changes in volume are not double counted in the process of adjusting the weights for the index. This is accomplished through a mathematical process called chaining, which follows standard methodologies established by the U.S. Census Bureau for similar indexes.

What are some limitations to the index?

By its nature, the TSI takes a macro-level view of transportation and cannot substitute for detailed data in examining local and mode-specific transportation issues.

The TSI does not yet cover 100% of the for-hire transportation industry. In some cases "tons" are used as a proxy for ton-miles and "passengers" as a proxy for passenger-miles. While there is justification for these substitutions, given data limitations, it would be ideal to have actual ton-miles and passenger-miles for all modes. Similarly there are some modes for which BTS must rely on privately collected, proprietary data.

There are some issues that relate to transportation and the economy that the TSI does not address. These are explained more fully in section 8.

What are some areas that the index does not cover?
Does the TSI show the benefits of each transportation mode? No, the index is not an estimate of the benefits of each mode of transportation. Transportation exists to serve the rest of the economy, by providing mobility and accessibility for passengers and freight, and the TSI measures only monthly physical output. It does not address such topics as the impact of freight modes on business logistics or the impact of passenger modes on communities. The "value added" measure used in constructing the index is a concept related to input-output analysis, which relates the addition in value to gross domestic product (beyond inputs already accounted for) generated by an industry sector. It is not an evaluation of the external benefits of a sector or mode of transportation.

Why aren't passenger automobiles, private or in-house trucking, and so forth. covered in the TSI?
The TSI is intended to measure the for-hire transportation services industry, which like other service industries has in the past not been as well represented in economic indicators as manufacture of goods. Much freight movement and passenger travel in the United States is not provided by the for-hire transportation industry, but by private individuals and by nontransportation firms. Passenger movement by private automobiles is not included in the TSI, but is found in other economic indicators. Similarly, in-house trucking operations run by retailers, manufacturers, and other nontransportation firms are excluded. The index also does not cover transportation equipment, fuel, and other related businesses that provide inputs for transportation services. Finally, other, existing economic indicators address sale of goods; the TSI does not.